theorists of the period: Emmerich de Vattel and Adam Smith. Both viewed turnpike, bridge, and canal building as a way to build links among existing commercial centers. Connecting markets in cities and towns provided opportunities for producers and consumers to engage in commercial exchanges; therefore, the cost of building a channel of commerce—a canal or road—paled in comparison to its usefulness.16
Some American canal promoters like Elkanah Watson—and, later, De-Witt Clinton—readily imbibed European political economists’ arguments in favor of transportation-infrastructure investments while discarding part of their underlying analysis. The glaring difference between a New York canal and a British turnpike was that the former would not link a chain of already established marketplaces—it would instead plow through unsettled territory. Watson acknowledged and embraced this difference by suggesting that European ideas had to be adapted on an “enlarged American scale,” writing, “If we proceed on the European mode of calculation, waiting in the first instance to find the country through which canals are to pass, to be in a state of maturity and improvement, the answer is at hand—No! But calculating on the more enlarged American scale, and considering the physical circumstances of the country in question, should the canals precede the settlements, it will be justified on the principles of sound policy.” To begin building out-of-doors support for this “sound policy,” Watson decided to start writing essays and sending them to newspapers in New York City under the pen names “A Citizen” and “An Inland Navigator.”17
In those articles, Watson expanded on his idea that canal development should be seen as a catalyst to encourage territorial settlement. Building existing towns with active commerce could not be a precondition for public infrastructure investment in America; instead, that had to be the goal of such policies. To this end, constructing “channel[s] of commerce,” ones more bold than the two corporate proposals before the legislature, would soon inspire transformative development. “A vast wilderness will, as if were by magic, rise into instant cultivation,” Watson predicted. Canal building represented an opportunity to actively instigate commercial growth and shape the state’s destiny, both to satisfy its own internal needs and to raise its profile as a state that was both a partner and a competitor with other states. Therefore, although Watson’s reasons for wanting to see a New York canal reach the nation’s western territories might have seemed more self-consciously cosmopolitan than Governor Clinton’s professed desires to settle the interior of the state, it was grounded in a realpolitik, state-centric conception of interstate commerce in the federal union.18
In his written appeals to both the public and Philip Schuyler, Watson took pains to lay out his concerns that New York might lose out to competing states’ commercial-development policies. By 1792 Watson looked at George Washington’s Patowmack Company and saw it as well on its way toward breaching the Mississippi River, diverting the profits of western commercial expansion to Virginia. As admirable as Watson thought that ambition to be, he also feared it would deliver a devastating and permanent blow to New York’s long-term commercial prospects. “[A] channel of commerce,” he explained, “may receive an early bias to a different point,” but “when once established in any particular direction, it is generally found difficult to divert it.”
To give Washington’s concern “a fair competition” and to avoid losing out on western development altogether, Watson therefore wanted New York legislators to think more boldly and imaginatively about their project. Moreover, as a political entrepreneur himself, Watson perceptively recognized that the scale of the project would forever be tethered to the sources and structure of its financing. The proposals before the legislature were to build canals by creating two corporations. Lawmakers were becoming more familiar with and supportive of the corporate form; corporations were also useful tools for attracting investors with private capital and managing their interests.
Yet Watson believed that the larger canal he wished to see built could not be financed by a corporation. To be clear: Watson was not suggesting that private interests would fail to build a sound canal or would constrict the settlement of the state, nor did he think that toll rates might become so heavy as to render the canal empty. Rather, he thought that if the canal were to ever truly be a public good, where the public reaped the benefits of the project in full, that outcome could not be delivered by a private venture.
To Watson, the proposed canal’s path and utility were so self-evident that he believed it should be treated as a natural channel of commerce—similar to a waterway or river—instead of being subject to the same political-economy practices that gave protections of monopolistic exclusivity, special regulations, and private privileges to other artificially built bridges and turnpikes. He recognized that even thinking about internal-improvement projects in this way would require a theoretical and an intellectual pivot among lawmakers before it could be institutionally elaborated in changes to the way the state expected such projects to be organized, financed, and executed. At the time, no American model existed—neither in state-statute books nor in the institutional memory of legislators or out-of-doors political entrepreneurs—for how a state could directly plan, fund, and construct a project as grand as the canal Watson was proposing. Nevertheless, only “a scale of a truly enlarged [canal] policy” that involved the state funding the project “out of its own ample means” would “leave the passage free and open” for future generations. If the policy goals of canal building were settlement and economic development oriented toward the interest of the state, the state then bore responsibility for financing the project. This was the “enlarged American scale” Watson envisioned for the nation’s applied political economy, one that acknowledged and departed from European political economy to better suit domestic needs.19
Recognizing that he was proposing something novel, Watson urged lawmakers to exercise their fiscal imaginations. “Are we advanced to a sufficient state of maturity to justify an undertaking of this magnitude?” he rhetorically asked. Moreover, he thought that if the state was focused on economic-development outcomes, it would want the canal to have as many users as possible, making hefty toll collections counterproductive. Because a New York canal would not link ready-made markets but would instead enable development along an arterial channel, Watson did not think it was viable to pay for the enterprise directly through either benefit taxation—a tax paid by the people who would benefit from living alongside the canal—or through tolls collected from the users of the canal. Because the state’s interest was in seeing as much development as possible, it would not have the same interest in turning a profit from toll collection as private or incorporated owners would. “Private individuals having a toll in view,” he wrote, would realize profits that “would probably be small for a few years, but the increasing benefit which will arise from this species of property, will keep equal pace with the augmenting settlement and cultivation of the country.” In time, “posterity will be burthened with a weighty tax (in the article of toll) to the emolument of the successors of the first adventurers, which ought not to exist in a land of liberty, where the intercourse should be as free as the air which we breathe.”
In Watson’s mind, therefore, the canal was simply too important to be privately owned; its toll revenues would be far too large to be properly placed in the hands of private interests. What was needed, therefore, was for states to once again take on debt. Yet instead of paying for a war, these new obligations would fund internal-improvement investments that would pay for themselves over time. Watson thus anticipated the financial arrangements that would one day fund the canal’s construction, suggesting that the state go into debt and issue its own bonds rather than delegate canal construction to privately held corporations and their stockholders. “If executed gratuitously by the public,” Watson predicted that such a financing method would be low risk; “the State in effect will be retarded only a few years,” he explained, before “receiving a tenfold return for all its disbursements” in canal construction outlays.20
